Gray v. . Richmond Bicycle Co.

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] A cause of action is merged in a judgment rendered upon it, not only for the reason that a judgment is of a higher nature, but because it would be vexations to the one party and of no benefit to the other to permit the recovery of two judgments against the same person for one debt. (Davies v. Mayor, etc., of N.Y.,93 N.Y. 250, 254; Nicholl v. Mason Spaulding, 21 Wend. 339;Wayman v. Cochrane, 35 Ill. 152; Hogg v. Charlton, 25 Penn. St. 200; Marshall v. Stewart, 65 Ind. 243; Freeman on Judgments, § 215; 15 Amer. Eng. Encyclo. of Law [1st ed.], 336.) As a judgment of a court in any state is entitled to full faith and credit in the courts of all the states, it is a merger of the cause of action in every part of the Union. (Besley v.Palmer, 1 Hill, 482; Mills v. Duryee, 7 Cranch, 481;Hampton v. M'Connel, 3 Wheat. 232.)

The judgment of the Circuit Court of Indiana, rendered upon the promissory note in suit, is, therefore, a bar to this action, unless the plaintiff made out a case of fraud in securing jurisdiction of his assignor, sufficient for the consideration of the jury. He insists that the appearance of Jackson Starr as attorneys for Allerton-Clarke Co. was procured by fraud, and, consequently, that the Indiana court had no jurisdiction of that corporation. He further insists that as such appearance was procured by the fraud of the defendant in this action, it is estopped from invoking the judgment thus recovered by it as a bar. The defendant expressly admits that "even a foreign judgment may be successfully assailed for fraud in its procurement." As both parties concede that a judgment, recovered in a sister state through the fraud of one party in procuring the appearance of another, is not binding on the latter when an attempt is made to enforce such judgment in this state, we shall proceed without further discussion to consider the question whether the evidence would have authorized the jury to find the defendant guilty of fraud in the premises. (Davis v. Cornue, 151 N.Y. 172; Hunt v. Hunt, 72 N.Y. 217; Freeman on Judgments [4th ed.], § 576; Black on Judgments, § 903.)

At the commencement of the correspondence between the parties the relation of debtor and creditor existed between them, and the defendant, as the debtor, had given a mortgage to Allerton-Clarke Co., as the creditor, without its knowledge or consent. That mortgage, and another ahead of it, covered all the property of the mortgagor, worth about $20,000, and the claim of Allerton-Clarke Co., the mortgagee standing last upon the list of those purporting to be secured, was subject to prior claims amounting to $24,000. As Allerton-Clarke Co. stood a poor chance of collecting their debt except by attacking the mortgage, the defendant may have had an object in inducing them to take judgment and thereby to ratify the mortgage. It may have intended that they should become bound by it and unable to overturn it upon the ground of fraud, of which there was some evidence. Moreover, the defendant had property in this state which might be attached here, with danger of loss to the defendant and its friends in Indiana, unless the New York creditors could be induced to come in under the mortgage. The parties did business in different states and were so widely separated from each other that Allerton-Clarke Co. knew nothing of what had been done until they were informed by the defendant. While the defendant was not legally bound to speak at all, it was bound, if it did speak, to take no advantage, either by misrepresentation or concealment. If it broke silence, the circumstances required the utmost candor in every statement. It spoke through Mr. Wilson, its president, who had executed the mortgages for the defendant and knew all the facts. Under these circumstances, whatever he wrote in relation to the situation was the act of the defendant and the rule of uberrima fides applied to every statement made and every fact withheld. He could not mislead the creditors, nor willfully cause them to act on what they believed were the facts when he knew they so believed, but also knew the facts to be materially different. While the law did not make it his duty to write, it required him to exercise the utmost good faith and to make a full and fair disclosure when he volunteered to write.

He wrote, apparently, to induce Allerton-Clarke Co. to place their notes in the hands of certain attorneys recommended by him, so that judgment could be taken upon them, which would be a ratification of the mortgage, as their claims were not due except by virtue of its provisions. Either with or without a furtive intent he made one material mis-statement and suppressed three material facts. He stated that the assets of the defendant were ample to pay all the preferred claims, and omitted to state that the mortgage to Allerton-Clarke Co. was second to that of the Second National Bank for $13,000, given at the same time; that it could get no advantage from the mortgage until all the other mortgagees whose claims amounted to $24,000 were paid in full, and that the attorneys recommended were acting for the Second National Bank, the party that would derive the greatest benefit from a ratification of the mortgage. The mis-statement, the omissions and the surrounding circumstances should be considered together, for facts of trifling importance, when considered separately, may afford clear evidence of fraud when considered in connection with each other. While the expression in the first letter, "you will find that the property will be ample to pay the notes," may have been intended simply as an opinion, it may have been intended to divert attention and prevent inquiry. This is true of a similar expression in the second letter, although it assumed the form of a statement of fact, viz.: "The assets are ample to pay all of these preferred claims." While according to the general rule no one is liable for the expression of an opinion, "this is true only when the opinion stands by itself," for "it may be so expressed as to bind the person making it to its truth, whether it take the form of an opinion or not." (Hickey v. Morrell,102 N.Y. 454, 463.) The opinion, which was evidently intended to induce action by Allerton-Clarke Co., does not stand alone in this case, for it must be considered in connection with the suppression of the three facts above mentioned. Those facts may have been withheld either by accident or design, and it is not for the court to decide whether the purpose was honest or dishonest. Good faith required the writer not to take advantage of his correspondent, and he may have acted with or without an intent to deceive; it was for the jury to say. It may have been simply the unintentional omission of one writing in a hurry to state all the facts, or it may have been done willfully with a deceitful purpose to cause Allerton-Clarke Co. to believe what was not true and to act under a fraudulent concealment of the actual state of affairs.

After assuring Allerton-Clarke Co. that they were secured, that the assets were ample to pay the mortgages, and that "we will see that you are protected," it is a suggestive omission that no allusion is made to the large mortgage. So, after stating that "your claim, along with" the four others named, is secured by a mortgage, it is significant that there is a failure to state that such claim was subordinate to all the others. The statement in the first letter that the mortgage covered all the property and was ample to pay "these notes," and in the second to pay "these preferred claims," with no mention of the large mortgage ahead of these notes and claims, tended to mislead. The assertion of certain material facts in connection with an assurance of safety might well be regarded as a declaration that no other material fact existed. A telegram conferring authority for an appearance by attorneys was requested instead of a letter, and this tended to prevent investigation. Mr. Wilson may have realized, when writing a letter calling for immediate action in order to avoid the loss of a benefit purporting to have been conferred, that the undisclosed facts, if known to Allerton-Clarke Co., might induce them to refuse to act as requested or to thus ratify the mortgage. If so, it became his duty to speak, yet he remained silent, and the jury might properly have found that his silence was part of a scheme to defraud.

Evidence was given tending to show that the Indiana judgment was entered September 29th, and if so, the letter of September 30th from Jackson Starr, that judgment was ready for entry on receipt of the notes, which were never forwarded, was misleading; and if, as other evidence tended to show, the judgment was entered October 4th, and not until after the receipt of the letter of October 2nd, which virtually stayed proceedings until the receipt of further information, the judgment was entered without authority. After writing that letter Allerton-Clarke Co. had a right to believe that no further proceedings could be taken without further instructions. The facts relating to fraud and the want of authority permitted diverse inferences. The intent with which the letters were written was a question of fact, for the circumstances warranted a finding of guilt or innocence. If they were written with a fraudulent intent the judgment was no bar, but if they were written with an innocent purpose, it is a conclusive defense. Questions of fraud, above all others, are for the jury, and we think it was error for the trial court to withdraw the case from them, because there is a foundation in the evidence for a conclusion either way that would not shock the sense of a reasonable man. (Bagley v. Bowe, 105 N.Y. 171, 179; Smith v. Coe, 55 N.Y. 678.)

It was not necessary for the plaintiff to go into the state of Indiana and obtain relief from the judgment through its courts, for, as we have held, "a court of one state may, where it has jurisdiction of the parties, determine the question whether a judgment between them, rendered in another state, was obtained by fraud, and, if so, may enjoin the enforcement of it, although its subject-matter is situated in such other state." (Davis v.Cornue, 151 N.Y. 172, 179.) The assertion of the foreign judgment as a bar in this action was an attempt to enforce it indirectly, and it was the duty of the trial court to send the case to the jury with the instruction that if they found the judgment was procured by fraud, it could not be asserted as a bar in this state.

We are also of the opinion that it was a question of fact whether Allerton-Clarke Co. ratified the judgment or were guilty of laches. They knew some facts and had an opportunity to know more, but whether they discovered, or should have discovered, enough to bind them or to require them to make some disclaimer before commencing this action, was for the jury, under all the circumstances, to determine. As the whole case was for the jury, the judgment should be reversed and a new trial granted, with costs to abide the event.

PARKER, Ch. J., O'BRIEN, BARTLETT, MARTIN, LANDON and CULLEN, JJ., concur.

Judgment reversed, etc.